EuroDry Ltd.

Thank you for standing by, ladies and gentlemen, and welcome to the Eurodry conference call on the second quarter 2022 financial results. We have with us today Mr. Aristides Pidas, Chairman and Chief Executive Officer, and Mr. Tasos Aslitis, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, please press star 1 on your telephone keypad and wait for the automated message advising your line is open. I must advise you that this conference is being recorded today. Please be reminded that the company announced its results with a press release that has been publicly distributed. Before passing the floor to Mr. Pitas, I would like to remind everyone that in today's presentation and conference call, Eurodry will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to slide two of the webcast presentation, which has the full forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And now I would like to pass the floor over to Mr. Petas. Thank you, sir. Please go ahead.

Hello, ladies and gentlemen. Good morning. Thank you for joining us for the scheduled conference call. I have with me Tasos Aslidis, our chief financial officer. The purpose of today's call is The first quarter ended June 30th of 2022. Please turn to slide 3. Our income statement highlights are shown here. For the second quarter of 2022, we reported total net revenues of $21 million and net income of $10.6 million, or $3.61 per diluted share. Adjusted net income acceptable to common shareholders was $9.9 million, or $3.38 per diluted share. Adjusted EBITDA for the period was $13.7 million. With positive earnings and a dry bulk market that is still anticipated to remain firm for the second half of the year, we believe our stocks will be trading at much higher levels, given the net asset value of the company as well. We believe these factors create captivating opportunities for us, and therefore the company's board of directors has approved the share repurchase program for up to a total of $10 million of the company's common stock to be used at management's discretion. The board will review the program after a period of 12 months. transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors. The program does not require the company to purchase any specific number or amount of shares and may be suspended or reinstated at any time at the company's discretion and without notice. At CFO, Tassos Aslidis will go Please turn to slide 4 for our operational highlights. Motor vessels Ekaterinis charter was extended for a minimum period until February 2023 to a maximum period until April 20, 2023, at 105% of the average Baltic Cancer Marks Index. While sister vessel, motor vessel Xenias charter, was also extended to a maximum period until May 15, 2024, also at 105% of the average Baltic Council index. days as well, at $15,750 per day, after completing its dry dock for approximately 23 days during the second quarter. Furthermore, motor vessel Santa Cruz was fixed again for a small trip of about 15 to 25 days at $11,500 per day, and motor vessel Pantelis for a trip of 55 to 65 days at $13,000 per day. earlier in the quarter, which was followed by its scheduled ride dock from where it sailed yesterday. The vessel is now fixed for a trip that will earn it a minimum of $15,000 per day for 65 days. Finally, Motovessel Tassos was fixed for about 80-100 days at $20,600 per day and is also Regarding commercial off-hire, Motovet and Alexandros P were hired for 2.2 and 3.9 days respectively during this quarter, whilst waiting to commence their next employment due to complications that arose from dealing with the COVID-19. We are very pleased to announce that we have completed our 2021 sustainability report, which is available on our website. Our commitment towards all aspects of ESG is steadfast. Please turn to slide 5 to review our current fleet. Our current fleet consists of 11 vessels, including six Panamaxes, two Ultramarines, with an average age of 13.5 years and a carrying capacity of approximately 800,000 deadweight tons. Turning on slide 6, we review the current vessel employment schedule. As you can see, fixed rate covers for the remaining quarters of 2022 stands at around 31%. This figure excludes the three ships Moving to slide 7, we will go over the market highlights for the quarter ended June 30, 2022, and as it currently stands. The market continues to be driven by a shaky supply and demand balance, which is reflected in rates trending lower in recent weeks due to the ongoing geopolitical conflicts and volatility surrounding the greater economy, such as high commodity prices and inflation. the average spot market rate for Panamaxes was approximately $25,400 a day in the second quarter. By July 1st, the price drifted lower to about $21,500 per day and currently stands at around $17,000 per day. Similarly, the one-year time shutter rate for Panamaxes was about $26,000 per day, dropping to $20,250 per day by July 1, and currently stands at $16,750 per day. Despite the drop, the BPI index strength is still relatively strong, especially considering it comes against a fairly muted iron ore market, which has seen flat cargo volumes on the back of more restrained Chinese steel production and iron ore demand. Please turn to slide 9. The global GDP growth forecasts have been further reduced for 2022 by the IMF in its latest report, as several additional events have hit the world economy already weakened by the pandemic. The ongoing geopolitical conflict between Russia and Ukraine added to existing inflationary pressures that had already started mounting due to the economic stimuli provided during and financial policies, including a series of aggressive interest rate hikes in order to address it. With elevated energy prices, mainly due to the Russian-Ukraine conflict, and lingering supply chain issues, as well as additional slowdowns in China due to regional COVID-19 lockdowns and the property sector crisis that may further suppress Chinese growth, the IMF has lowered its global GDP estimates today and to 2.9% for 2023. GDP growth for the United States was revised downwards to 2.3% for 2022, a 1.4% export law for May forecast, due to lower growth and tighter monetary policies. Similarly, European growth Ukraine conflict and tighter monetary policies. Due to major global spillovers caused by its various regional issues, China's growth was revised also down to 3.3% for 2022, a 1.1 percentage point difference from April's forecast. Growth in emerging markets and developing economies is also expected to sharply decelerate. India's forecast has been revised down to 7.4% for 2022 and 61% for 2023, while the only country with better forecasts in this quarter seems to be Brazil, with an unanticipated growth of 1.7% in 2022 and 0.8% previously, due to a robust recovery in Latin America. From the developed economies, Japan and the Asian five have also been revised downwards for 2022 and 2023 due to concerns about slowing economies following the U.S. interest rate hike and ongoing inflation. Looking at the drive of trade, and according to Claxon's research, demand growth is expected to decrease to just 1.2% in 2022 compared to 3.8% for the previous year. by 2.1%. Rate and growth projections are being continuously revised as the effects of geopolitical tensions between Russia and Ukraine on world growth and trade are being continuously assessed. Please turn to slide 10. Lack of new building orders in recent years The order book remains at just 7.2% of the existing fleet, which has mostly been unchanged over the past 18 months, despite the strongest in more than a decade charter rates. Now, please turn to slide 11 for our dry bulk fleet overview. Laszlo expects new deliveries of about 3.5% of the current fleet to be delivered in 2022 and 3.2% in 2023, versus a fleet growth of around 2.4% in 2022 and below 1% in 2023, as the outlook to fleet ratio remains at a record low and contracting is subdued. Please turn to slide 12, where we summarize the outlook in the drivel tomorrow. The market remains firm, with earnings still above historical averages, despite demand-side concerns around the Russian-Crim conflict and macroeconomic headwinds. Beyond the overall risks to the global economy, finance demand in the bulk sector Conjecture remains an issue, and so far this year, most ships have consistently been stuck for longer than in 2021. This naturally adds inefficiency to the supply chain and reduces effective supply, thereby tightening the supply-demand balance in favor of a bonus operator. Ordering of new ships for 2023 and 2024 deliveries are expected to be non-existent due to lack of available slots in shipyards. In addition, the lack of clarity for the fuel of the future remains an unknown, something that makes placing a new order a very risky option. On the other hand, normalization of trade is not the word of the crowd. per day greatly reduced from its three-month earlier highs but still significantly higher than median levels. On the other hand, the historical medium and average levels and approaching the highest levels of the decade, but still considerably lower than the peaks of 2008. Whilst we are overall quite bullish that in the medium term the dry-talk market will remain strong and perhaps strengthen further if today geopolitical problems are resolved, at current vessel prices we are reluctant to make further acquisitions. We will be monitoring the market, though, for any opportunities that may arise, as our strong balance sheet provides us with plenty of firepower. And with that, let me now pass the floor over to our CEO, Kostas Lidis, to go over the various financial highlights in more detail. Thank you.

Thank you very much, Mr. Tillich. Good morning from me as well, ladies and gentlemen. Over the next five slides, I will give you another view of our financial highlights for the second quarter and first half of 2022 and compare them to the same periods of last year. For that, let's turn to slide 15. For the second quarter of 2022, the company reported total net revenues of 21 million, representing a 48.8% increase of a total net revenues of 14.1 million during the second quarter of 2021. And that was the result, on the one hand, of the slightly higher time structure rates our vessels earned during the second quarter of this year compared to last year, but mainly because of the increase in the average number of vessels we owned and operated in the second quarter of 2022 compared to the second quarter of last year. It is worth noting that compared to the second quarter of 2021, RO3 in the second quarter of this year is about 45% larger. The company reported net income, a net income attributable to common shareholders for the second quarter of this year, of 10.6 million. as compared to net income of 2.2 million, and net income attributable to common shareholders of 1.95 million for the same period, the second quarter of 2021. Interest and other financing costs, including interest income and loss of debt extinguishment for the second quarter of 2022, amounted to 0.8 million compared to 0.5 million for the same period of 2021, not including of 1.7 million charge on tech extinguishment that were reported last year. Interest expense for the second quarter of 2022 was higher, mainly due to the increased amount of debt that we had during the period as compared to the same period of last year. and the higher underlying LIBOR costs. Adjected EBITDA for the second quarter of 2022 was 13.7 million compared to 9.2 million achieved during the second quarter of 2021. Basic and diluted earnings per share attributable to common shareholders for the second quarter of 2022 were $3.66 basic and $3.61 diluted, calculated on about 2.9 million weighted average number of social spending, compared to 83 cents basic and 81 cents diluted, calculated on about 2.4 million weighted average number of social spending for the second quarter of 2021. Excluding the effect on the income attributable to common shareholders, For the unrealized gain on derivatives, the adjusted earnings attributable to common shareholders for the second quarter of this year would have been $3.43% and $3.38% basic diluted respectively. For the second quarter of last year, excluding again the unrealized loss in this case on derivatives and the loss on debt extinguishment, $2.81, and $2.76, basically diluted respectively. Usually, security analysts do not include the above items in their public statements of earnings per share. Let us now look at the numbers for their corresponding six-month periods ended June 30th for 2022 and 2021. In the first half of this year, the company reported total net revenues of $39.3 million, representing a 73.1% increase over total net revenues of $22.7 million during the first half of 2021. And that was the result of both a higher time charter ratio of vessels served during the first half of this year, and the increased average number of vessels we own and operate. We reported net income, a net income as compared to net income of 3.1 million, and net income attributable to common shareholders of 2.4 million for the first half of last year. Interest and other financing costs, including interest income for the first half of 2022, amounted to 1.4 million, compared to 1.1 million for the same period of 2021, non-inclusive again of the 1.7 million charge on debt extinguishment we suffered, we registered last year. This increase is mainly due again to the increased amount of debt in the current period as compared to the same period of 2021 and the underlying light work cost increase. The adjusted EBITDA for the first half of 2022 was $26.4 million, compared to $13.2 million achieved during the first half of 2021. Basic and diluted terms per share, attributable to common shareholders for the first half of 2022, were $7.35 basic and $7.25 calculated on 2.9 million weighted average number of social spending, compared to $1.03 basic and $1.01 diluted for the same period of last year, calculated on 2.3 million and 2.4 million weighted average number of social spending, respectively. Excluding the effect attributable to common shareholders for the first half of this year of the unrealized gain on derivatives, the adjusted earnings for the six-month period would have been $6.37 basic and $6.68 diluted. The six-month period ended June 30, 2021. Again, excluding the unrealized loss on derivatives and the loss of debt extinguishment, the adapted earnings attributable to common shareholders would have been $3.43 basic and $3.33 diluted. Let me now turn to slide 16 to review our fleet performance. As usual, we will start our review by looking first at our fleet utilization rate. for the second quarter of 2022 and 2021. As we do all the time, our utilization rate is broken down to commercial and operational. During the second quarter of 2022, our commercial utilization rate was 99.4%, while our operational utilization rate was 99%, compared to percent operational for the second quarter of last year. Our overall utilization rate was 98.3 percent in the second quarter of 2022, compared to 99.4 percent for the second quarter of last year. On average, we own and operated 10.79 vessels in the second quarter of this year, earning an average time $23,490 per day compared to 7.37 vessels in the same period of 2021, earning an average $22,613 per day. As I mentioned earlier, our average fleet during the second quarter this year was up about 45% compared to the second quarter of 2021. Our total operating expenses including management fees, general and limited expenses, but excluding the total cost of dry docking, was $6,562 per vessel per day in the second quarter of this year, compared to $6,467 per vessel per day for the second quarter of 2021. If we move further down in this table, we can see the cash flow break-even rate for the second quarter 2022, which also takes into account driver's expenses, interest expenses, and loan repayments, and preferred dividends if they take in cash that only excludes any balloon payments. Thus, during the second quarter of 2022, our daily cash flow break-even rate was $11,000. $986 per vessel per day compared to $10,314 per vessel per day for the same period of last year. The increase mainly due to the higher loan repayments that we did during the second quarter of 2022. Let's now go over our position rate and the remaining figures for the first half of this year compared to the first half of 2021. During the first half of 2022, our commercial utilization rate was 99.7%, and our operational utilization rate was 99.3%, compared to 100% commercial and 99.7% operational utilization rate for the same period of last year. On average, 10.7 vessels were owned and operated earning an average timeshifter equivalent rate of $24,025 per vessel per day, compared to 7.19 vessels owned and operated in the same period the first six months of 2021, earning on average $18,879 per vessel per day. Our total operating expenses, again, including management fees, G&A expenses, but excluding diverging costs, were $6,584 per vessel per day in the first half of this year, compared to $6,518 per vessel per day for the same period of 2021. Looking at the bottom of this table, we can see again the cash flow break-even rate for the first half of 2022, which takes to account also driving expenses, interest expenses, and loan repayments, and preferred dividends if any of them were paid in cash. In the first half of 2022, our daily cash flow over a few days was $12,393 per vessel per day, compared to $10,688 per vessel per day for the same period of last year, the reason again being that we had higher loan repayment Let's now move to slide 17, our EBITDA calculator. As we noted in previous earnings presentations, we use this slide as a calculation tool that enables our shareholders and investors to assess the earnings potential of our fleet in the current year and under the current environment, and to allow them also to make their own assumptions and assess the impact of them to our profitability. As you can see here from the table, our contracted covers in fixed-rate contracts is about 47% for the third quarter of this year, declining to about 13% in the fourth quarter of this year. Our calculators here indicatively show, in the second part of the table, the Supermax and Panamax Baltic get translated to average rates than average blended rates for our ships. Based on these assumptions, and assumptions for OPEX and GNA costs, and assuming a 5% commission rate, one can estimate the EBITDA contribution of the vessel base of our fleet yet to be fixed. The user of this calculator, as I mentioned earlier, can make his or her own assumptions, about the average earnings that our open days might earn during the third and fourth quarter, and assess our EBITDA for the remaining quarters and full year 2022. Let's now move to slide 18 to review our debt profile. As of June 30th, 2022, we had an outstanding bank debt of about 71.8 million. Looking at the chart, we can see that our debt repayments over the next three years range between 10 million and about 14 million per year, and then drop to 2.8 million and 3.6 million in 2025 and 2026. Our next balloon payment is towards the end of 2023 for a balloon of about 11.3 million for one of our companies. We expect to be able to refinance this payment if we choose so, as we have done in similar situations in the past. A quick note here about the cost of our debt. The average margin of our debt is about 2.7%, and assuming a LIBOR rate of about 2.8% on the top of it, we can estimate the total cost of our senior debt as of the end of the second quarter to be about At the bottom of this slide, we can also see that projected cash flow rate even rate for the next 12 months broken down to its components. We can see here that our expected cash flow rate even for the next 12 months is about $13,100 per version per day. Let's now move to slide 19, where we can see some highlights from our balances. in a simplified way. This slide shows a snapshot of our assets and our liabilities. Our assets consist of our cash and other short-term assets, and of course of our vessels. As of June 30th, 2022, we had cash and other assets of about 17 million, and the book value of our vessels was approximately 160 million, resulting in total book value of assets of about $107.7 million. On the liability side, our debt as of June 30th, as I mentioned, was about $71.8 million, representing about 40.5% of the book value of our assets. Additionally, other liabilities amounted to $2.9 million, or about 1.6% of our total assets, resulting in surplus equity of about $102.5 million, translating to approximately $30 of net book value per set. However, based on our own estimates and on market transactions, as of the end of June, the market value for our vessels was around $235-$236 million, or about 48% higher book value, suggesting an NAV per share in excess of $59 per share. With our share price recently trading in the high teens, it closed yesterday just below $18 per share, there appears to be a sizable gap to our NAV, suggesting significant appreciation potential to our shareholders and investors. And with that, I'd like to turn the floor back to Aristides to continue the call. Thank you, Tasos.